COVID-19 shocks on Nigeria’s retail sector to still shape its performance in 2021

NIGERIA – The coronavirus pandemic has caused retailers to retool their operational, merchandising, and marketing strategies to align with consumers’ changing shopping habits across the global.

With retailers acting as a link between the processing companies and the end consumers, the impact of the pandemic, rising inflation, movement restrictions and other issues have resulted in significant changes in behaviour across the board.

Nigeria’s retail sector which is the third largest contributor to the country’s Gross Domestic Product (GDP), was not exempted from the wave of change with TradeDepot, a B2B eCommerce platform for consumer goods in Africa, highlighting that more store owners started exploring alternative channels of reaching, acquiring and servicing customers – especially online and social media.

To this end, demand for TradeDepot’s services, having a network of over 50,000 micro retailers across Nigeria, increased by 500%, with a 300% increase in transaction value and volume on the back of the pandemic.

Another major change witnessed in the sector was consumer buying patterns shifting slightly towards more food items, with growth in purchase of food and essentials as opposed to other categories.

Proof of that is TradeDepot’s data revealing a 10% increase in the overall contribution of food items to its distribution volumes, compared with 2019.

A win for the retail sector was realised when lockdown impacted the ability of beverage manufacturers and distributors to sell their products in bars, restaurants and clubs, which usually account for up to 60% of their revenue.

In a bid to still reach their consumers and move as much volumes as they could, the manufacturers shifted their attention to Mom and Pop, convenience stores etc to cushion the impact.

Increased food spending to still shape Nigeria’s retail sector in 2021

As the sector settles into the new year, TradeDepot predicts that some of the trends that came to play in 2020 such as increased spending on food and essential goods, will continue to influence behaviour across the market in 2021.

“With the pandemic still ongoing, we envisage that people will continue to take a cautious approach to mingling in crowds and will spend more time at home than in previous years. As a result, spending on food and essential goods is likely to increase,” indicates TradeDepot.

Manufacturers are expected to explore more alternative route-to-market channels with capabilities to build retail networks and offer logistics-as-a-service to mitigate the risks that come with serving new customer bases.

In terms of product offerings, manufacturers are foreseen to adapt to rising inflation and dwindling disposable income by extending the trend of smaller packs to other product cateories other than detergents, in a bid to drive more volume in the consumer segment of the market, which accounts for 65% of the market.

The e-commerce platform also anticipates a rise in products and services designed to help consolidate and improve the industry such as auxiliary services like goods packaging and processing etc.

Competition among players will still be on the rise with the number of challenger value brands and new market entrants offering lower priced products in key categories expected to increase.

This will be triggered by the fact that consumers have gotten increasingly price conscious and more eager to experiment with new, lower-priced products.

Hurdles to jump

The pandemic has presented a bunch of opportunities that the players can sink their teeth in. However, challenges have also clearly presented themselves.

Absence of data and verifiable insight has come out as strong contender in this forte. This often makes it difficult to assess the opportunities and challenges that abound in the space.

Though a relatively new discipline, there is an opportunity for companies with the right capabilities to capture data and utilise it to cater to the audience.

The sector is also hampered by infrastructure and logistics issues that undermine the efforts of the industrious business owners to meet the demands of the customers and grow their businesses.

Access to working capital is still the biggest challenge most retailers face in trying to grow their ventures.

According to TradeDepot, structured access to short term inventory financing at minimal interest rates will help stimulate growth.

“With some more support from government, public institutions and private sector players, there is the potential to transform the Nigerian retail market and achieve a quick win for boosting the nation’s GDP,” Onyekachi Izukanne, CEO and Co-Founder of TradeDepot said.

TradeDepot has built an expansive network of micro retailers, working with global distributors and manufacturers like Nestlé, Unilever, GB Foods and Danone to make household supplies more accessible and affordable.

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